Australian Tax Office says it can’t rely on crypto users’ own records

The Australian Tax Office (ATO) says you cannot trust crypto investors to keep track of your crypto transactions and earnings, although most investors do their best.

Speaking at the 14th ATAX International Conference on Tax Administration on November 23, ATO Commissioner Chris Jordan stressed that many new cryptocurrency investors may not fully understand their tax reporting obligations:

"In a rapidly growing industry with new investors, we cannot rely on taxpayers to know to keep records of their investment income and capital gains and disclose them on their tax returns."

"Our main concern is that many taxpayers believe their crypto earnings are tax-free or only taxable when holdings are returned to Australian dollars," he added.

Jordan explained that the ATO has been working on ways to "push" people in the right direction, such as pre-filling data on tax returns to prompt crypto users to report their investments.

The commissioner also said that the ATO has increased its business data matching capabilities in 2021 by obtaining information from cryptocurrency demand-side platforms (DSPs), shared registers, and brokers.

"We have expanded our data comparison protocols to obtain more data from third parties to help with emerging investments such as cryptocurrency."

He added that "we are working hard to improve the way we collect, manage, share and use data, but we are only scratching the surface."

Related: Reserve Bank warns Australians against betting on 'fashion-driven' cryptocurrencies

However, Jordan noted that "most people do the right thing" as tax compliance, or that the "tax performance" of individuals and small businesses in Australia is high with "little or no intervention" from the ATO with 94% and 87% respectively. .

Chainalysis down

One company the ATO can turn to in the future is the Commonwealth Bank of Australia Chainalysis partner.

On November 24, Chainalysis Australia and New Zealand Country Manager Todd Lenfield saying The Australian Financial Review that your firm hopes to provide key expertise to AUSTRAC and the ATO.

“We want to have conversations with AUSTRAC about what they are looking to regulate and explain to the tax office the lessons that can be learned from what the IRS is doing. We can take the experience we have in space and bring a local flavor, ”he said.

The firm currently provides blockchain analytics services for the US Federal Bureau of Investigation and Internal Revenue Service, it also investigated the Russia-based Suex OTC crypto business, which was targeted by the US Department of the Treasury in September on facilitating transactions for ransomware payments.